Sri Lanka aims to build two coal power plants

SINGAPORE, Mar 14 (Reuters) Sri Lanka is planning to build two coal power plants as it seeks to reduce power shortages this decade and cut painfully expensive oil imports, a government minister said on Tuesday.

''We're facing a crisis. We're contemplating switching over to coal, which is not used at all in Sri Lanka,'' said W.D.J.

Seneviratna, Minister for Power and Energy, at a power conference in Singapore.

The government is taking initial steps to build a coal power station in the west of the Indian Ocean island that is expected to be commissioned by 2010, with another project being considered on the eastern coast, he said.

The first plant would have an initial capacity of 300 megawatts (MW) by 2010, with another two construction phases each bringing on 300 MW by around 2012, D.R. Pullaperuma, manager at the Ceylon Electricity Board, told Reuters. The second plant would be in four phases of 250 MW each, though he said there was no timetable yet.

Coal prices in Asia have climbed but lagged the rally in oil and gas prices, leading many Asian countries to reconsider plans for increased dependency on gas and to look towards the cheap if dirty fuel.

Sri Lanka gets about a third of its electricity from hydropower and the rest from diesel or fuel oil-fired power stations, but has been hit by the surge in international oil markets while it maintains subsidised domestic power prices.

Pullaperuma said the country was facing a power shortfall of about 100-120 MW next year and was also considering extra diesel-fired power as an emergency stop-gap.

''Using diesel is very costly and we've not been able to maintain a balance in tariff as 40 percent of the population is living below the poverty line and industrialists want a lower tariff to compete internationally,'' Seneviratna told the conference.

He said the country was also in the process of building another 150 MW hydropower plant, and was looking at increasing biomass fuel cultivation as well as building wind generation up from a mere 3 MW currently.

''Hydro resources have been exhausted. Large areas can be used for biomass and it would be additional income for people living below the poverty line,'' he said. ''We're in negotiations with Germans over wind,'' he added, without naming firms.

REUTERS CS KP1029